ETF Education Report: FIRST TRUST NEW YORK MUNICIPAL HIGH INCOME ETF (FMNY)

What this ETF is trying to do

The FIRST TRUST NEW YORK MUNICIPAL HIGH INCOME ETF (FMNY) is an exchange-traded fund. Based on its name, it focuses on high-income municipal bonds from the New York area.

What the numbers show

When looking at an ETF, it is important to know the difference between "price return" and "total return." Price return only tracks how much the share price changes. Total return includes both the price change and any cash distributions (dividends) paid out.

Here is what the data shows for FMNY:

• Year-to-Date (YTD): The price return is approximately -4.51%. However, the total return is approximately -2.08%.

• One Year: The price return is approximately -4.24%, while the total return is approximately -0.60%.

• Three Year: The price return is approximately -2.13%, but the total return is approximately 9.17%.

To visualize the price change, we can look at an estimated price from roughly one year ago. The estimated price was $26.62, and the current price is $25.49.

Income and distribution explanation

This ETF provides cash distributions to investors. The distribution yield is approximately 3.91%. This number describes the cash paid out relative to the current ETF price. These payments usually happen monthly, with 12 payments recorded over the last year.

It is important to remember that a high distribution yield does not mean an investor earned that same percentage as their total return. Total return is the most accurate way to see how much value was actually gained or lost over time.

NAV erosion explanation

"NAV erosion" refers to a decline in the Net Asset Value (the actual value of the assets held by the fund). While a falling share price can sometimes look like erosion, they are not always the same thing.

For FMNY, the erosion-risk score is 94, which is labeled as "Stable / sideways." The erosion severity is rated as "good," and there is no severe erosion-risk flag present.

Pros

• The three-year total return is positive at approximately 9.17%.

• The fund has a "good" erosion severity rating and is considered stable/sideways.

Cons

• The price return has been negative for the year-to-date, one-year, and three-year periods.

• The total return has been negative for the year-to-date and one-year periods.

Beginner takeaway

When studying FMNY, notice how the total return is often higher than the price return. This happens because the cash distributions help offset some of the share-price declines. Always look at both price return and total return to get a full picture of how an ETF is performing.